Banks on Q3 lending: Tighter for corporates, relaxed for consumers
A survey conducted by the Bangko Sentral ng Pilipinas (BSP) showed tighter lending standards for companies and more relaxed for households in the third quarter of the year amid uncertainties brought about by the COVID-19 pandemic, as well as geopolitical tensions led by the Russia-Ukraine war.
Based on the diffusion index approach of the Q2 2022 Senior Bank Loan Officers’ Survey (SLOS), the BSP said there was mixed results as credit standards for enterprises generally showed a net tightening, while a net easing of overall lending standards was reflected for consumer loans in the third quarter.
Just like for the second quarter, the central bank said the DI-based method pointed to net tightening of overall credit standards across all corporate borrower firm sizes, specifically top corporations, large middle-market enterprises, small and medium enterprises, and micro enterprises (MSMEs).
“Bank respondents reported that the overall tightening of credit standards was mainly due to the following factors: deterioration of borrowers’ profile and of the profitability of banks’ portfolio, and a more uncertain economic outlook,” the BSP said.
Despite booking a stronger-thanexpected gross domestic product (GDP) growth of 8.3 percent in the first quarter and the anticipated faster growth in the second quarter, the Cabinet-level Development Budget Coordination Committee (DBCC) slashed the growth target to a range of 6.5 to 7.5 percent instead of seven to eight percent for this year due to accelerating inflation and the impact of Russia’s invasion of Ukraine.
In terms of specific credit standards, the net tightening of general lending standards was reflected in stricter collateral requirements and loan covenants, including increased use of interest rate floors.
For household lending, the BSP said that the DI-based results continued to indicate a net easing of overall lending standards for all types of consumer loans namely, housing, credit card, auto and personal/salary loans in the third quarter of the year.
“Mirroring the survey results from the previous quarter, the DIbased approach indicated bank respondents’ expectations of net easing overall credit standards for consumers due to improvement in borrowers’ profile and profitability of banks’ portfolio, less uncertain economic outlook, and increased tolerance for risk,” it added.
According to the BSP, the survey showed a net increase in overall credit demand from across all firm classifications and key categories of consumer loans, particularly housing loans, credit card loans, and auto loans in the second quarter of the year amid the improvement in business and consumer confidence.